CRS Crystal Amber Fund Limited

 
TIDMCRS 
 
8 July 2015 
 
 
                          CRYSTAL AMBER FUND LIMITED 
 
                     ("Crystal Amber Fund" or the "Fund") 
 
           Monthly Net Asset Value and Interim Dividend Declaration 
 
 
Crystal Amber Fund announces that its unaudited net asset value ("NAV") per 
share on 30 June 2015 was 168.26p (31 May 2015: 160.84p per share). 
 
The proportion of the Fund's NAV at 30 June 2015 represented by the ten largest 
holdings, other investments and cash (including accruals), was as follows: 
 
Top ten holdings               Pence per share   Percentage of investee equity 
                                                             held 
 
Grainger plc                        34.9                     3.4% 
 
Hurricane Energy plc                13.1                     11.8% 
 
Leaf Clean Energy Company           12.9                     29.9% 
 
STV Group plc                       12.3                     6.7% 
 
Pinewood Group plc                  11.5                     4.1% 
 
Sutton Harbour Holdings plc         10.3                     29.3% 
 
Coats Group plc                      9.0                     2.4% 
 
Dart Group plc                       7.8                     1.2% 
 
Balfour Beatty plc                   5.2                     0.3% 
 
4imprint Group plc                   5.0                     1.6% 
 
Total of ten largest holdings       122.0 
 
Other investments                   31.6 
 
Cash and accruals                   14.7 
 
Total NAV                           168.3 
 
Investment Adviser's commentary on the portfolio 
 
Over the quarter to 30 June 2015, NAV per share increased by 13.5 per cent. The 
Fund's average cash position over the quarterly period has been 5.3 per cent, 
implying a return on the investment portfolio of 14.3 per cent. Over the Fund's 
financial year to 30 June 2015, NAV per share has increased by 4.6 per cent or 
4.9 per cent including the dividend paid. 
 
The top three positive contributors to NAV growth over the quarter to the end 
of June were Thorntons plc (5.7 per cent contribution), STV Group plc (1.3 per 
cent) and Hurricane Energy plc (1.2 per cent).  The three main detractors have 
been Ophir Energy plc (0.7 per cent), Plus500 Ltd (0.4 per cent) and Juridica 
Investments plc (0.3 per cent). The Fund sold its remaining holding in Plus 500 
Ltd, realising a total profit including dividends of GBP4.3 million. 
 
During the quarter to 30 June 2015, the Fund disclosed notifiable positions in 
Grainger plc and Pinewood Group plc, increased its position in Hurricane Energy 
plc, Coats Group plc and STV Group plc and sold out its holdings in Aer Lingus 
Group plc and Thorntons plc. 
 
Aer Lingus Group plc ("Aer Lingus") 
 
In June, given the limited upside, the Fund disposed of its stake in Aer Lingus 
following the favourable share price reaction to the Irish Government's 
decision to dispose of its stake to IAG. The proceeds have been re-invested 
elsewhere where the risk reward profile appears to be more compelling. 
 
The Fund realised gains in Aer Lingus of EUR15 million (GBP10.8 million) and banked 
dividends of EUR0.8 million (GBP0.6 million) (compared to a total investment of EUR 
21.1 million (GBP15 million)). 
 
Balfour Beatty plc ("Balfour Beatty") 
 
Over the period, the Fund started to build a position in Balfour Beatty, the 
international engineering and construction group. 
 
Following six profit warnings over the last two years, Leo Quinn's arrival as 
Chief Executive provides the opportunity to address several legacy issues in 
construction and turn around a business selling on an enterprise value to sales 
ratio of 0.2. 
 
We believe that the value of Balfour Beatty's Public-to-Private Partnership 
("PPP") projects provide support to the company's current stock market value. 
 
Coats Group plc ("Coats") 
 
Coats is the world's leading industrial thread and consumer textile crafts 
business. In 1890, it listed on the London Stock Exchange. 
 
During the quarter, the Fund increased its shareholding to 33.9 million shares, 
equivalent to 2.4 per cent of Coats' issued share capital. Coats is capitalised 
at GBP352 million and in the year to 31 December 2014, reported operating profits 
of GBP64 million on revenues of more than GBP1 billion. 
 
Coats had net cash of GBP206 million at 31 December 2014. During 2014, 
principally as a result of a 115 basis point decrease in the discount rate, 
Coats' pension liabilities increased by GBP197 million to GBP375 million. The board 
of Coats is engaging with the UK Pensions Regulator following the receipt of a 
Warning Notice in December 2014. 
 
We believe that the share price currently fails to reflect the underlying value 
of the business. The Fund notes recent acquisitions by Coats which it regards 
as a sensible use of its cash resources. 
 
Grainger plc ("Grainger") 
 
In June, the Fund purchased a 3.2 per cent stake in Grainger. 
 
Grainger was established in 1912 and is the UK's largest listed residential 
property owner and manager. Its traditional reversionary business is based 
predominantly on regulated tenancies which provide substantial, high quality, 
predictable and resilient cash flows. Its portfolio of 7,400 reversionary 
assets has a carrying value of GBP1.5 billion. As these properties become vacant, 
Grainger estimates that they will generate a surplus of GBP500 million, 
equivalent to 120p a share. This embedded value is the difference between 
today's market value compared to the vacant possession value at today's prices. 
It does not reflect any future benefit from house price inflation. This 
portfolio is expected to generate GBP120 million of gross cash each year until 
2030. Grainger also owns 8,400 properties as part of its market rented 
portfolio valued in excess of GBP1.1 billion. 
 
Grainger's shares trade at a 21% discount to unaudited net asset value of 293p 
at 31 March 2015. The company has stated that sales prices achieved have been 
6.6% higher than vacant possession value and this supports our analysis that 
current market values are in excess of vacant possession values. 
 
Grainger's stated net asset value excludes the estimated reversionary surplus 
of 120p a share. 
 
We believe that Grainger's portfolio, providing visibility of cash realisations 
through to 2030, represents an attractive asset for an insurance company 
seeking to match this asset profile against long- term future liabilities. 
 
We also note that Grainger pays an average interest rate of 5.1% on its GBP1 
billion of debt. This excludes commitment fees. We believe that in the current 
interest rate environment, there is considerable scope to secure better terms 
for shareholders, which could increase pre-tax profits by more than GBP10 million 
a year. 
 
In March, Grainger's CEO, Andrew Cunningham, announced he will step down at the 
next AGM in February 2016. On 30 June, his successor was announced as Helen 
Gordon, currently Head of Real Estate Asset Management at Royal Bank of 
Scotland. 
 
Pinewood Group plc ("Pinewood") 
 
Pinewood is a leading provider of studio and related services to global 
screen-based industries. 
 
In 2011, the Fund was Pinewood's largest shareholder and held the view that 
Pinewood's iconic brand and technical excellence should have enabled it to have 
delivered higher profitability. Following a cash offer from Peel Holdings, the 
Fund then sold its position realising a profit of GBP8.7 million. 
 
We have continued to follow developments at Pinewood and during the quarter 
acquired a 4.1% interest in Pinewood as a result of a placing. 
 
On 30 June 2015, Pinewood announced its full year results to 31 March 2015. 
While the company stated that it had delivered strong growth, the Fund notes 
that of the GBP8.1 million of profit after tax, GBP3.1 million was derived from tax 
credits and a further GBP1.1m from Pinewood's share of results of joint ventures. 
Revenue was GBP75 million. We believe that Pinewood's core business should be 
achieving a much higher level of profitability. 
 
On 1 July 2015, the Investment Adviser to the Fund met with Pinewood's 
management and expressed this view. The company has responded by saying that it 
is seeking to engage constructively with the Fund and is open to the Fund's 
plans. 
 
The Fund is therefore engaging with Pinewood and is currently optimistic of a 
more helpful dialogue than took place in 2010 and 2011. 
 
Thorntons plc ("Thorntons") 
 
On 22 June, Thorntons announced the terms of a recommended cash offer from 
Ferrero International S.A. ("Ferrero") at 145p per share.  As a pre-condition, 
the Fund agreed to sell its entire stake in Thorntons to Ferrero on the day of 
the announcement. The Fund was the largest shareholder in Thorntons owning 18.9 
per cent of Thorntons' issued share capital. We believe that the ability to 
deliver this holding to Ferrero was an essential element of the transaction. 
 
In our view, the offer recognises the value that the Fund had identified in 
Thorntons' brand and production capability. Thorntons' recent profit warnings 
had exposed some operational challenges in growing third party grocery sales. 
 In our view, Ferrero will bring its expertise in this sales channel and an 
international marketing and distribution capability. This should accelerate 
Thorntons' growth. We believe that Ferrero, a family owned business, can bring 
to Thorntons the long term focus that has made Ferrero succeed worldwide. 
 
The Fund realised profits of GBP7.5 million on its shareholding in Thorntons (on 
a total investment of GBP11.5 million). 
 
Dividend 
 
The Board has declared an interim dividend of 2.5p per ordinary share in 
respect of the year ended 30 June 2015.  The dividend will be paid on 14 August 
2015 to shareholders on the register (the record date) on 17 July 2015.  The 
shares will be quoted ex-dividend on 16 July 2015. 
 
Transactions in Shares 
 
Over the period, the Fund bought back 4,455,630 shares at an average price of 
146.18p per share as part of its buyback programme. 
 
For further enquiries please contact: 
 
Crystal Amber Fund Limited 
William Collins (Chairman) 
Tel: 01481 716 000 
 
Sanlam Securities UK Limited - Nominated Adviser 
David Worlidge/James Thomas 
Tel: 020 7628 2200 
 
Numis Securities Limited - Broker 
Nathan Brown/Hugh Jonathan 
Tel: 020 7260 1426 
 
Crystal Amber Advisers (UK) LLP - Investment Adviser 
Richard Bernstein 
Tel: 020 7478 9080 
 
 
 
END 
 

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